As China's Markets Roar Higher, Buy These Stocks

Thursday, November 13, 2014 As China's Markets Roar Higher, Buy These Stocks   by Jamie Dlugosch   President Obama is in China for good reason.   The economic powerhouse is critical to the global growth, including growth in the U.S.   Stocks in China are in full rally mode, too, after a period of weakness. On Wednesday, the Shanghai Index marked its highest close since Nov. 15, 2011.   Helping fuel the most recent gains is the coming linkage between Shanghai and Hong Kong.   That connection will provide greater liquidity and pricing transparency that should benefit investors in those markets.   The biggest winners will be brokerage firms that expect to see higher trading volumes when the link is made next week.     FURTHER READING   OPEC's Worst Nightmare Comes True   The U.S. has been forced to deal with backward, oppressive regimes, like Saudi Arabia, for decades -- simply because geography had blessed them with massive reserves of the life-blood of modern society -- oil. Well, that dominance is about to come crashing to an end. Because this month, the United States is set to become THE leading energy producer in the world. This is the day the Saudi's -- and every other OPEC nation -- prayed would never come. And we've found a great way for the average guy to cash in.   Click here for all the details.     On Wednesday China brokerage stocks saw some of the largest gains with Citic Securities (Shanghai: 600030) up nearly 8%, Haitong Securities (Shanghai: 600837) up almost 6% and Huatai Securities (Shanghai: 601688) gaining 5.6%.   Given the complexity of buying individual stocks in China, the best way to get exposure to these markets are with exchange-traded funds.   One option would be the Global X China Financials ETF (NYSE: CHIX), but such a vehicle is not perfect exposure to the individual China stocks you may want.   Perhaps a better option would be to look at U.S. listed China stocks. Interestingly many of those names are not trading at multiyear highs.   Of course I'm not talking about the well-publicized China names like Alibaba (NYSE: BABA) or Baidu (NASDAQ: BIDU).   Both of those names are indeed trading at their highs.   Instead, take a look at some of the lesser-known China names. One option would be YY Inc. (NASDAQ: YY). Shares of the Chinese social media internet company are trading significantly below their 52-week highs.   YY shares traded lower on Wednesday after reporting blowout earnings.   The company reported a profit of 87 cents per share versus the estimate of 76 cents per share. Revenues also beat expectations.   I would view the stock trading lower as an opportunity to buy shares of a fast-growing company at a discounted valuation.   Analysts expect YY to grow profits by 43% in 2015. At current prices, shares trade for 28 times 2014 estimated earnings.   I recall Baidu having similar valuation metrics before that stock went on a tear to double in value.   You might not get the same horsepower with a lesser known name like YY, but a 25% to 50% gain in a one- to two-year period would not be out of the question.   Another interesting Chinese stock listed in the U.S. is iDreamSky (NASDAQ: DSKY).   This Chinese mobile gaming company is trading flat since going public in August.   Here the valuation is remarkably compelling. Analysts expect iDreamSky to grow profits by a whopping 133% in 2015, but shares trade for only 25 times 2014 estimated earnings.   iDreamSky is expected to release earnings  in the latter half of November. I would want to own the stock before those results.   A strong number would likely result in shares moving higher.   Results at King Media (NASDAQ: KING) and Zynga (NASDAQ: ZNGA) bode well for iDreamSky.   The action in Chinese markets suggest strength in the economy there. Getting exposure with U.S. listed China stocks might be a good way to outperform the market as we head to 2015.   Jamie Dlugosch Editor Investor Research Institute   To Read More From Investor Research Institute Click Here
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